How AI Can Help Foreign Institutions Comply with FinCEN’s New Authority to Counter Fentanyl

For financial institutions outside the United States, compliance with U.S. anti-money laundering (AML) regulations has always been a balancing act. But in 2025, that balance just became more delicate.

On May 2, 2024, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) invoked a new authority under Section 9714(a) of the Combatting Fentanyl Trafficking Act, targeting illicit financial flows linked to fentanyl trafficking. This authority allows FinCEN to issue orders that compel both domestic and foreign financial institutions doing business in the U.S. to implement heightened recordkeeping and reporting measures.

For Mexican banks and fintechs—and many others globally—this signals a new and heightened level of scrutiny, where AI-powered compliance tools are no longer just a competitive edge; they are fast becoming a strategic necessity.

What FinCEN’s New Orders Mean in Practice

FinCEN’s orders under the new authority expand and extend the application of Geographic Targeting Orders (GTOs), focusing on money laundering linked to fentanyl and other synthetic opioids. Institutions must now apply intensified due diligence, including:

• Enhanced customer screening procedures.
  
• More granular transaction monitoring for specific typologies identified by FinCEN.
  

According to FinCEN’s 2025 press release, the agency “continues to prioritize combating the illegal production and trafficking of fentanyl,” emphasizing partnerships with financial institutions worldwide. FinCEN’s analysis demonstrated that the information the regulator receives from financial institutions is a critical element in their ability to more effectively investigate and disrupt the malicious actors.

Findings of FinCEN’s analysis include: 

• The cartels and associated brokers use front companies, money mules, and US-based intermediaries to procure fentanyl chemicals from the People’s Republic of China (PRC)-based suppliers. 

• PRC-based chemical suppliers accept a wide range of payment methods, including e-commerce platforms. 

• Fentanyl-related financial activity in the US primarily involves people in large urban areas, including southwest border counties in California and Arizona. 

• Domestic sales of fentanyl appear to be conducted mainly in cash and peer-to-peer transfers, according to BSA reports. 

• Methods to launder fentanyl proceeds vary in sophistication. BSA identified complex schemes, including the use of suspected Chinese money laundering organizations potentially enabling the movement of illicit drug gains on behalf of the cartels. 

Failure to comply exposes foreign institutions to reputational risk, correspondent banking disruptions, and potential regulatory penalties from U.S. authorities.

The Mexican Financial Institutions Case Study

Mexico plays a unique role as both a major trading partner and a frequent touchpoint for cross-border money flows to and from the United States. Mexico’s financial sector faces a historic challenge under FinCEN’s newly issued orders dated July 2025,  identifying three Mexico-based financial institutions—CIBanco S.A., Institution de Banca Multiple (CIBanco), Intercam Banco S.A., Institución de Banca Multiple (Intercam), and Vector Casa de Bolsa, S.A. de C.V. (Vector)—as being of primary money laundering concern in connection with illicit opioid trafficking, and prohibit, respectively, certain transmittals of funds involving all three financial institutions. According to FinCEN’s announcement, these are the “first ever orders issued under the new authority.”

While the orders explicitly cover certain U.S.-based institutions, FinCEN emphasizes cross-border vulnerabilities—particularly relating to U.S. dollar-denominated transactions and correspondent banking channels that touch Mexican institutions. Mexican banks and fintechs handling trade finance, USD clearing, or remittance services into the U.S. are especially exposed.

Several risk factors stand out:

• Multi-Jurisdictional Correspondent Banking: Mexican banks maintaining U.S. correspondent accounts are indirectly obligated to monitor downstream clients more rigorously, even if those clients are not U.S.-based.
  
• Remittance Service Providers (RSPs): Mid-sized fintechs offering international money transfers from Mexico to the U.S. must screen not just for sanctions compliance, but also for fentanyl-linked financial activity typologies identified by FinCEN—such as funnel account structures and trade-based laundering linked to precursor chemicals.
  
• Emerging Typologies Identified by FinCEN: The US regulator highlights misuse of shell companies and front businesses as growing vectors. Mexican institutions must update customer risk assessment processes to account for these risks.
  

AI-driven compliance systems are uniquely positioned to assist:

• Dynamic Customer Risk Assessment: AI can continuously update customer profiles in real time as new information surfaces—whether through adverse media, changing transaction behaviors, or regulatory updates.
  
• AI Transaction Screening can detect evolving criminal patterns such as funnel account deposits tied to opioid trafficking, even when those patterns do not fit into pre-defined rule sets.
  

With over 8.9 million alerts related to international fund transfers reported by Mexican institutions in the first two months of 2024 alone (UIF Informe de Actividades Enero–Febrero 2024), Mexican financial institutions already manage substantial cross-border financial flows. The combination of this scale and FinCEN’s expanded authority makes adaptive AI monitoring not just helpful but increasingly essential.

For example, funnel account activity—where multiple cash deposits are made across different U.S. states and withdrawn in Mexico—requires advanced, adaptive monitoring beyond what rules-based systems typically offer.

Which Foreign Institutions Should Pay Attention

While Mexican financial institutions are a high-profile case, the scope of FinCEN’s fentanyl orders is broader. Any foreign financial institution engaged in U.S. dollar clearing or serving U.S.-connected customers could fall within its reach.

Risk-prone categories include:

• LatAm Regional Banks: Particularly those handling remittances or trade finance.
  
• Asian Fintechs: Offering cross-border payments into U.S. markets.
  
• Eastern European Payment Platforms: Managing cryptocurrency transactions linked to U.S. entities.
  

The Financial Action Task Force (FATF) underscored in its 2022 report on Money Laundering from Fentanyl and Synthetic Opioids that synthetic opioid trafficking “increasingly involves the use of small and mid-sized financial institutions, shell companies, and virtual assets to launder proceeds.”

For instance, a São Paulo-based fintech facilitating U.S.-Brazil remittances could unknowingly process fentanyl-related funds if customer screening and transaction monitoring controls are not robust and AI-enhanced.

Why AI Is a Strategic Compliance Tool in 2025

Traditional rules-based AML systems operate on fixed parameters and often lag behind evolving criminal typologies. FinCEN’s fentanyl-related orders underscore the need for dynamic, responsive systems capable of adapting in real-time.

AI supports compliance in two primary ways:

1. Customer Screening Enhancements
   
   • Real-time customer risk scoring using machine learning algorithms.
     
   • Behavioral analytics that flag unusual activities tied to fentanyl-related risk indicators.
     
   • Cross-referencing customers against adverse media, PEP lists, and updated sanctions from the U.S. Treasury, and many other databases.
     
2. Transaction Monitoring Improvements
   
   • AI transaction monitoring identifies anomalies in large cross-border transfers.
     
   • Detection of new typologies not yet codified in static rule sets.
     
   • Continuous learning from both internal data and public advisories like FinCEN’s fentanyl-focused guidance.
     

According to PwC’s 2024 Global Economic Crime Survey, 64% of financial institutions globally plan to increase investment in advanced analytics and AI technologies to strengthen their financial crime compliance programs.

Practical Next Steps for Compliance Leaders

For COOs, CROs, and Chief Compliance Officers navigating this shifting regulatory terrain, several priorities emerge:

• Review and Update Customer Risk Models: Ensure they incorporate AI-enhanced analytics rather than relying solely on static KYC frameworks.
  
• Upgrade Transaction Monitoring Systems: Deploy AI-driven solutions capable of adapting to emerging risks like fentanyl-linked financial flows.
  
• Coordinate with Local Regulators: Engage proactively with domestic regulators to align U.S. compliance obligations with home-jurisdiction expectations.
  

AI is not a silver bullet. But in the context of FinCEN’s expanded authority and the global fight against fentanyl trafficking, it represents a critical enabler. Foreign institutions that invest early in AI-powered AML compliance will be better positioned to maintain secure, uninterrupted access to U.S. markets.